Nalcor Energy Board of Directors

Department

Natural Resources

Authority

Section 6 of the Energy Corporation Act

Remuneration

No Remuneration

Purpose:

Nalcor is a provincial Crown corporation established in 2007 under a special act of the Legislature of the Province of Newfoundland and Labrador. The company’s business includes the development, generation, transmission and sale of electricity; the exploration, development, production and sale of oil and gas; industrial fabrication site management; and energy marketing.

The mandate of Nalcor, established in legislation under the Energy Corporation Act, is to invest in, engage in and carry out activities in all areas of the energy sector in the province and elsewhere, including:

Developing, generating, producing, transmitting, distributing, delivering, supplying,selling, exporting, purchasing and using power from wind, water, steam, gas, coal, oil,hydrogen or other products used or useful in the production of power.

reviewing and approving the business, financial, strategic and other plans to enable Nalcor to execute its strategy;

adopting processes for monitoring the company’s progress toward its strategic and operational goals;

approving the audited financial statements and Management’s Discussion and Analysis;

ensuring that Management has a process for identifying the principal business risks;

overseeing the integrity of the internal control systems;

ensuring that Nalcor has processes for operating within applicable laws and regulations;

ensuring the company has a compensation philosophy and framework;

ensuring a process is in place to measure the performance of senior executives of Nalcor;

ensuring Management creates a culture of integrity throughout the organization; and

ensuring that succession plans are in place for senior Management, including the President and CEO.

Nalcor’s legal structure at December 31, 2015 included the entities listed below.

Entity Name

Description of Interest

Newfoundland and Labrador Hydro (Hydro)

Wholly owned subsidiary

Nalcor Energy – Oil and Gas Inc. (Oil and Gas)

Wholly owned subsidiary

Nalcor Energy – Bull Arm Fabrication Inc. (Bull Arm Fabrication)

Wholly owned subsidiary

Nalcor Energy Marketing Corporation (Energy Marketing)

Wholly owned subsidiary

Muskrat Falls Corporation (Muskrat Falls)

Wholly owned subsidiary

Labrador Transmission Corporation (Labrador Transco)

Wholly owned subsidiary

Labrador-Island Link Holding Corporation (LIL Holdco)

Wholly owned subsidiary

Labrador-Island Link Limited Partnership (LIL LP)

Limited partnership in which Nalcor, through LIL Holdco, owns 100 per cent of the 75 Class A limited partnership units

Labrador-Island Link General Partner Corporation (LIL GP)

Wholly owned subsidiary

Labrador-Island Link Operating Corporation (LIL OpCo)

Wholly owned subsidiary

Labrador Churchill Management Corporation (LCMC)

Wholly owned subsidiary

Churchill Falls (Labrador) Corporation Limited (Churchill Falls)

65.8 per cent owned joint operation of Hydro

Twin Falls Power Corporation Limited (Twin Falls)

33.3 per cent owned joint venture of Churchill Falls

Gull Island Power Corporation (GIPCo)

Wholly owned subsidiary (inactive)

Lower Churchill Development Corporation (LCDC)

51 per cent owned subsidiary of (LCDC) Hydro (inactive)

The Nalcor Energy Board appoints individuals to the boards of these entities with the exception of the boards of Hydro, Churchill Falls, Twin Falls and LCDC, which are appointed by the shareholders of those companies.

Headquartered in St. John’s, Nalcor’s energy portfolio is located throughout the province.

Structure:

The structure for the Board of Directors for Nalcor Energy is prescribed in Section 6 of the Energy Corporation Act. There is additional information on the appointment of the Chairperson in sections 7 & 9. These sections are provided below.

Board of directors

6. (1) For the exercise and discharge of the powers and duties of the corporation, there shall be a board of directors comprised of not less than 5 and not more than 14 persons.

(2) The directors shall be appointed by the Lieutenant-Governor in Council, shall hold office during pleasure only and are eligible for reappointment.

(3) Except where otherwise prescribed under this Act, the corporation may exercise its powers by a resolution of the board.

(4) The directors shall be paid the salary or other remuneration that the Lieutenant-Governor in Council may determine, and the salary or remuneration together with all reimbursable expenses shall be paid by the corporation out of its funds.

(5) Where a vacancy occurs on the board because of the death, illness, resignation, removal of a member, or for another reason, the Lieutenant-Governor in Council may appoint a person to fill the vacancy.

(6) Exercise of the powers of the corporation is not impaired because of a vacancy on the board.

(7) Until the board makes other provision under section 10, a majority of the directors who then hold office constitutes a quorum of the board.

(8) Notwithstanding that it is afterward discovered that there was some defect in the appointment or qualification of a person purporting to be a director, all acts done by the corporation and the board shall be as valid as if that defect had not existed.

Chairperson and CEO

7. (1) There shall be a chairperson of the board to be appointed by the Lieutenant-Governor in Council from among the directors.

(2) The chairperson holds office for the period and under the terms and conditions that may be prescribed by the Lieutenant-Governor in Council or in an agreement made under section 9, and shall vacate office in accordance with those terms and conditions.

Service Contract

9. (1) With the approval of the Lieutenant-Governor in Council the corporation may enter into an agreement with a person that provides for his or her appointment to the office of chairperson or chief executive officer of the corporation.

(2) An agreement under this section may prescribe the terms and conditions of appointment to the office and the term, tenure and remuneration, including the salary, pension and other rights and benefits that the appointee is to receive and the terms and conditions under which the appointment may be terminated and by whom before the expiration of the term of the appointment.

(3) A person with whom an agreement is made under this section in relation to an office

(a) holds that office in accordance with the agreement and shall vacate it or them accordingly; and

(b) does not, by reason only of the appointment to that office, become an employee of the province.

serve as an independent and objective party to monitor the integrity of Nalcor’s financial statements, financial reporting process and systems of internal controls regarding finance, accounting, and legal compliance;

identify and monitor the management of the principal risks that could impact the financial reporting of the Company;

appoint, approve compensation, and monitor the independence and performance of Nalcor’s external auditors;

monitor the compliance by Nalcor with legal and regulatory requirements;

provide an avenue of communication among the external auditors, management, and the Board; and

developing governance principles for the Corporation and its subsidiaries that are consistent with high standards of corporate governance and reviewing and assessing on an ongoing basis the Corporation’s system of corporate governance;

identifying and recommending candidates for appointment to the Board to be put before the Shareholder in the event of a vacancy on the Board;

reviewing and recommending a process for Director orientation, assessment, and compensation; and

Enterprise Risk Management with respect to the Corporation and its subsidiaries.

The primary responsibilities of the Compensation Committee are to:

consider and recommend for approval by the Board of Directors the appointment of the President and CEO and all other Officers of Nalcor and its subsidiaries;

with the chair of the Board of Directors, undertake an annual performance review of the President and CEO of Nalcor and report and/or make recommendations to the Board of Directors;

review and assess annually Nalcor’s succession planning policies and practices, and report and/or make recommendations to the Board of Directors;

establish and maintain a compensation philosophy and framework for Nalcor and its subsidiaries;

review and assess annually compensation and benefit policies and programs and pension plans of Nalcor for Executive, Management and all employees and recommend any changes or new policies or programs, where appropriate, to the Board of Directors;

review compensation and benefits mandates for collective bargaining mandates and any proposed tentative settlement and recommend to the Board of Directors;

review annually the Corporation’s performance management practices and procedures, and report and recommend any changes, as appropriate, to the Board of Directors; and

as necessary, provide guidance and direction to the Boards of subsidiary companies with respect to compensation and human resource policies and issues as outlined in this mandate.

The Safety, Health, Environment and Community Committee’s primary responsibilities include:

reviewing and reporting to the Board of Directors on Nalcor’s maintenance of safety, environment and health policies, procedures and practices and in the conduct of its operation, directed to prevent injury to its employees, the public and the environment;

reviewing with Management whether Nalcor’s safety, environment and health policies are effectively implemented and in compliance with statutory and regulatory requirements and report to the Board of Directors, at least annually, on Nalcor’s compliance with current industry, legislative, regulatory and corporate standards for safety, environmental and health;

reviewing the findings of reports arising from internal and external audits and assessments of safety, environment and health issues, together with Management’s response thereto and oversee to ensure that there is an agreed course of action leading to the resolution of any concerns, deficiencies or outstanding issues and timely follow-up on any unresolved matters;

reviewing with Management the impact of proposed legislation in matters of safety, environment and health on the operations of Nalcor and make recommendations to the Board of Directors on the appropriate responses and action for Nalcor;

reviewing and reporting to the Board of Directors Nalcor’s safety and environmental emergency response planning policies and procedures.

reviewing and approving annually the safety and environmental audit plans by Nalcor and external auditors and review of an annual Corporate report on safety and environmental issues identified by Management;

reviewing with Management and make recommendations to the Board of Directors as appropriate on the Corporation’s safety, environment, health and community programs, policies and procedures and any other matters relating to safety, environment, health and community that it considers relevant;

reviewing and approving the appointment, compensation and retention of external safety and environment auditors;

meeting with the Vice-President responsible at least annually to review safety, environmental, health or community matters that could have a material impact on Nalcor’s reputation, business or financial position and report to the Board of Directors thereon in a timely manner; and